Virginia, NC Battle for Microsoft Data Center

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Will dozens of these Microsoft data center containers soon be filling a facility in Virginia or North Carolina? The two states are battling for the project.

Economic development teams in Virginia and North Carolina are competing for a huge Microsoft data center project. The tech giant is in the late stages of site location for a new East Coast regional data center, and has looked at sites in both states, sources say.

Microsoft has built four huge data centers to support the growth of its online business, including its Windows Azure cloud computing platform. The sites in Chicago, Dublin, San Antonio and Quincy, Washington have each been in the neighborhood of 500,000 square feet and involved enormous capital investment.

Microsoft's focus on the mid-Atlantic region means another battle between Virginia and North Carolina, which competed head-to-head for the huge Apple data center that is now under construction in Maiden, North Carolina.

The Charlotte Business Journal reports that Microsoft has toured a site being developed by T5 Partners in Maiden, not far from the Apple iDataCenter project. With Google operating a facility just 25 miles away in Lenoir, Microsoft's reported interest in Catwaba County suggests an almost unthinkable economic development trifecta - that the world's three best-known technology companies operating major data centers within miles of one another.

UPDATE: The Hickory Record says Catawba officials are not aware of any Microsoft site visit. "To my knowledge, there have been no looks by Microsoft," said Scott Millar, president of the Catawba County Economic Development Corporation. Millar acknowledged he doesn't know the identity of every company that does site visits at the Maiden location.

Southern Virginia in Play
But Virginia is eager to avoid losing another blue-chip data center project to its neighbors to the south. Economic development officials in Virginia have been actively marketing potential data center sites in the southern part of the state, an effort that has paid off with at least one large federal government data center project.

The growth of the Mid-Atlantic Broadband Cooperative (MBC) has boosted connectivity in southern Virginia, using money from the state’s settlement with tobacco companies to build a faster backbone to support more data centers. MBC is a not-for-profit cooperative created in 2003 to provide affordable broadband to Virginia residents

Microsoft has been operating a pair of data centers in northern Virginia, where it has been one of the largest tenants in data centers operated by DuPont Fabros Technology (DFT).

Competing on Incentives
When a large company looks for a site for a major data center, it’s almost always a multi-state process. Issues like power costs, the suitability of a site for using free cooling and the availability of recycled water have been major site location factors in recent data center decisions.

But nowadays, the decision often boils down to economic incentives. Last year Virginia adopted targeted tax incentives to attract major data center projects to the state, offering an exemption from the Virginia Retail Sales and Use tax for computer equipment bought or leased between July 1, 2010 and June 30, 2020 for use in a data center.

To qualify for the tax break, the facility must be located in Virginia, generate capital investment of at least $150 million and create at least 50 new jobs that pay 1.5 times the prevailing average wage in the locality.

North Carolina has also been aggressive with incentives, and isn't afraid to craft legislation to improve its position. After Apple said it was leaning towards Virginia, North Carolina legislators quickly finalized a state-level incentive package that added another $3 million in tax breaks for the company, which then negotiated another $7.3 million in local incentives from Catawba County and the city of Maiden.

Microsoft opened its Dublin and Chicago facilities last summer. Microsoft has also announced plans for a large data center in West Des Moines, Iowa. That project was delayed when Microsoft slashed capital spending as a result of the economic downturn. Tax incentives were also critical to that deal, and Microsoft has several years remaining in which it can commence construction and still take advantage of the incentives.